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Monday February 6th, 2023

Sri Lanka power tariff revisions in Jan and July sought: Minister

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board will need another tariff hike to cut losses amid high fuel costs and cabinet approval have been sought for six monthly price revisions. Power and Energy Minister Kanchana Wijesekera said.

A tariff hike granted by the Public Utilities Commission in August was not enough to cover costs, and the agency is still making losses.

“When the CEB said it would cost 850 billion rupees a year to supply electricity based on the coal, diesel and furnace oil prices in April and revenue was only 250 billion rupees, the increase was only 250 billion rupees.

“Even that was not made on the increase in the cost of coal, and fuel. Last January a kilo of coal was 24 rupees. Now 114 rupees. Last January a litre of diesel was 139 rupees now it is 435 rupees.

“Furnace oil was close to 120 rupees, now it 320 rupees. This price increase was not made considering he 3 to 4 times increase in costs.

“Regardless of who opposed it, whoever becomes the line minister, whoever become the President of this country, whoever ran the administration, it is not possible to go forward without revising prices again.”

In 2023, where there is expected to be less rain than this year projected costs were 56.90 rupees a kilo Watt hour and current revenue was only 29.00 rupees a unit.

“There is a shortfall of 27.10 rupees a unit,” he said. “As a whole our generation cost will be 899 billion rupees, but we will get about 400 billion rupees. The CEB will have a 423 billion rupee loss.

“Nobody will give use coal free.”

“We went to cabinet last week asking for the Public Utilities Commission to make this change every January and July 2022.”

He said the steep price revision in 2022 was in party due to the failure of the PUCSL to raise tariffs for 9 years, raising questions about the usefulness of the regulator which had lost brought cost reflective prices.

“If after raising prices in January, costs fall in July due to renewables, then we can lower the price,” Minister Wijesekera said.

In Sri Lanka higher rainfall leads to a fall in costs.

He blamed the PUCSL partly for triggering the current crisis in the power sector by not raising prices for 9 years.

In 2022 however a part of the costs was due to procurement inefficiencies of fuel due to foreign exchange problems.

The key economic problem in post-independent Sri Lanka has been the soft-pegged central bank which have the country’s macro-economists to the power to print money to mis-target interest rates and create forex shortages and currency depreciation through flexible or discretionary policies.

The 2022 currency crisis the worst in its history, but the agency set up the style of Banco Central de la República Argentina in 1950 by US money doctor has busted the rupee from 4.70 to 360 to the US dollar so far.

Under an International Monetary Fund program, a new monetary law is to be enacted to legalize discretionary policies under ‘flexible inflation targeting’ which critics say is perhaps the most deadly impossible trinity monetary regime peddled to third world countries without a doctrinal foundation in sound money. (Colombo/Nov26/2022)

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Sri Lanka to address SME tax problems at first opportunity: State Minister

ECONOMYNEXT – Problems faced by Sri Lanka’s small and medium enterprises from recent tax changes will be addressed at the first opportunity, State Minister for Finance Ranjith Siyambalapitiya said.

Business chambers had raised questions about hikes in Value Added Tax, Corporate Income Tax and the Social Security Contribution Levy (SSCL) that’s been imposed.

It should be explored on how to amend the Inland Revenue Act, Siyamabalapitiya said, adding that the future months should be considered as a period where the country is being stabilized.

Both the VAT and SSCL are effectively paid by customers, but the SSCL is a cascading tax that makes running businesses difficult.

In Sri Lanka SMEs make up a large part of the economy, accounting for 80 per cent of all businesses according to according to the island’s National Human Resources and Employment Policy.

(Colombo/ Feb 05/2023)

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Sri Lanka revenues Rs158.7bn in Jan 2023 up 51-pct

ECONOMYNEXT – Sri Lanka’s government revenues were 158.7 billion rupees in January 2023 but expenditure and debt service remained high, Cabinet spokesman Minister Bandula Gunawardana said.

In January 2022 total revenues were Rs104.5 billion according to central bank data.

Sri Lanka’s tax revenues have risen sharply amid an inflationary blow off which had boosted nominal GDP while President Ranil Wickremesinghe has also raised taxes.

Departing from a previous strategy advocated by the IMF expanding the state and not cutting expenses, called revenue based fiscal consolidation, he is attempting to do classical fiscal consolidation with spending restraint.

President Ranil Wickremesinghe has presented a note to cabinet requesting state expenditure to be controlled, Gunawardana told reporters.

State Salaries cost 87.4 billion rupees.

Pensions and income supplements (Samurdhi program) were29.5 billion rupees.

Other expenses were 10.8 billion rupees.

Capital spending was   21 billion rupees.

Debt service was 377.6 billion rupees for January which has to be done with borrowings from Treasury bills, bonds and a central bank provisional advance of 100 billion rupees, Gunawardana said.

Interest costs were not separately given. (Colombo/Feb05/2023)

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Sri Lanka’s Ceylon Tea prices down for second week

ECONOMYNEXT – Sri Lanka’s Ceylon Tea prices fell for the second week at an auction on January 31, with teas from all elevations seeing a decline, data showed.

“In retrospect, the decline in prices would be a price correction owing to the overall product quality and less interest from some key importers due to the arrival of cargo at destinations ahead of schedule,” Forbes and Walker tea brokers said.

The weekly sale average fell from 1475.79 rupees to 1465.40 rupees from a week ago, according to data from Ceylon Tea Brokers.

The tea prices are down for two weeks in a row.

High Growns

The High Grown sale average was down by 20.90 rupees to 1380.23 rupees, Ceylon Tea Brokers said.

High grown BOP and BOPF was down about 100 rupees.

“Ex-Estate offerings which totalled 0.75 M/Kg saw a slight decline in quality over the previous week” Forbes and Walker said.

OP/OPA’s in general were steady to marginally down.

Low Growns

In Low Grown Teas, FBOP 1 was down by 100 rupees and FBOP was down by 50 rupees while PEK was up by 150 rupees.

The Low Growns sale average was down by 8.55 rupees to 1547.93 rupees.

A few select Best BOP1s along with Below Best varieties maintained.

OP1                     Select Best OP1’s were steady, whilst improved/clean Below Best varieties maintained.   Others and poorer sorts were easier.

PEKOE                 Well- made PEK/PEK1s in general were steady, whilst others and poorer sorts were down.

Leafy and Semi Leafy catalogues met with fair demand,” Forbes and Walker brokers said.

“However, the Small Leaf and Premium catalogues continued to decline.

“Shippers to Iran were very selective, whilst shippers to Türkiye and Russia were fairly active.”

This week  2.2 million Kilograms of Low Growns were sold.

Medium Growns

Medium Grown BOP and BOPF fell by around 100 rupees

The Medium Growns sale average was down by 33.40 rupees to 1199.4 rupees.

“Medium CTC teas in the higher price bracket witnessed a similar trend, whilst teas at the lower end were somewhat maintained subject to quality,” Forbes and Walker brokers said.

“Improved activity from the local trade and perhaps South Africa helped to stabilize prices to some extent.”

OP/OPA grades were steady while PEKOE/PEKOE1 were firm, while some gained 50-100 rupees at times.

Well-made FBOP/FBOPF1’s were down by 50-100 rupees per kg and more at times.

(Colombo/Feb 5/2023)

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